Law:

Section:

Section 72 of the Income-tax Act, 1961 [Corresponding to section 24(2) of the Indian Income-Tax Act, 1922] - Losses - Carry forward and set off of business losses - Assessment year 1956-57 - Assessee-company owned an oil and rice mill - In relevant previous year, it leased out entire mill and earned rental income - There had been no manufacturing operations during that year and only opening stock of oil and cake had been disposed of - In preceding assessment year, assessee had incurred loss in its business which was carried forward - Assessee sought to have said loss set off against profit of relevant assessment year - Said claim was rejected by revenue on ground that business carried out by assessee in relevant previous year, i.e., lease of mill was not same business as that carried on by assessee in earlier year in which loss was incurred - Whether merely because entire manufacturing plant was leased out for a duration, assessee could not be said to have given up its business altogether - Held, yes - Whether further, fact that during relevant accounting year assessee had a stock of oil and ground nut which he sold showed that assessee was still carrying on its business - Held, yes - Whether therefore, assessee was entitled to carry forward and set off loss of earlier year against income of relevant assessment year - Held, yes FACTS The assessee-company owned an oil and rice mill. During the assessment year 1956-57, the assessee had leased out its entire mill on a monthly rent to one 'V' and there were no manufacturing operations during the year and only the opening stock of oil and cake had been disposed of during the year. In the preceding year, the assessee had incurred a loss and same was carried forward. The assessee sought to have this loss set off against the profit of relevant previous year. The ITO disallowed the said claim. The AAC dismissed the appeal holding that the business carried on by the assessee in the relevant assessment year if any, was not the same as the business in which the loss was incurred. The order of the AAC was upheld by the Tribunal. On reference: HELD The rental income realised by the assessee in the instant case by letting out…

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